Decision Tree

What is a 'Decision Tree'

A decision tree is a schematic tree-shaped diagram used to determine a course of action or show a statistical probability. Each branch of the decision tree represents a possible decision or occurrence. The tree structure shows how one choice leads to the next, and the use of branches indicates that each option is mutually exclusive.

BREAKING DOWN 'Decision Tree'

A decision tree can be used to clarify and find an answer to a complex problem. The structure allows users to take a problem with multiple possible solutions and display it in a simple, easy-to-understand format that shows the relationship between different events or decisions. The furthest branches on the tree represent possible end results.

RELATED TERMS
  1. Branch Manager

    An executive who is in charge of the branch office of a bank ...
  2. Branch Accounting

    An accounting system in which separate accounts are maintained ...
  3. Christmas tree (oil and gas)

    A vertical assembly of mechanical elements used in oil exploration ...
  4. Branch Banking

    Engaging in banking activities such as accepting deposits or ...
  5. Foreign Branch Bank

    A type of foreign bank that is obligated to follow the regulations ...
  6. Separation Of Powers

    An organizational structure in which responsibilities, authorities, ...
Related Articles
  1. Fundamental Analysis

    Using Decision Trees In Finance

    A decision tree provides a comprehensive framework to review the alternative scenarios and consequences a decision may lead to.
  2. Options & Futures

    Using Decision Trees In Finance

    These decision-making tools play an integral role in corporate finance and economic forecasting.
  3. Stock Analysis

    Dollar Tree Posts Disappointing Q2 Earnings (DLTR)

    Discount retailer Dollar TreeĀ (NASDAQ: DLTR) recently posted lackluster second quarter earnings which missed analyst estimates on both the top and bottom lines. During the quarter, revenue rose ...
  4. Home & Auto

    How Does Your Homeowners Insurance Handle A Downed Tree?

    A downed tree can happen at any time due to a storm or old age. But when it falls, will your insurance cover it?
  5. Stock Analysis

    Dollar Tree A Retail Growth Star

    Dollar Tree had another sizzling quarter, as it continues to find post-recession prosperity.
  6. Investing

    Dollar Tree Forces Wal-Mart to Think High-End (DLTR, WMT)

    Wal-Mart shouldn't compete with its low-end competitor Dollar Tree. Instead, the company should compete with its higher margin competitors.
  7. Investing News

    Dollar Tree Shaken By Strong Dollar, Shares Fall (DLTR)

    Tuesday's selloff will pass and Dollar Tree, thanks to its merger with Family Dollar, will survive this.
  8. Stock Analysis

    Dollar Tree Is In A Sweet Spot

    Dollar Tree had good earnings during the recession and continues this trend into the recovery. Regardless of which way the economy goes, the company is strong.
  9. Home & Auto

    7 Tips to Cost-Effectively Landscape Your New Home

    Boost your new home's value and curb appeal with smart and cost-effective landscaping tips.
  10. Trading Strategies

    Eyeing a Loan? Consider Skipping the Banks

    Peer-to-peer lending platforms, such as Lending Tree, Lending Club and Prosper, offer borrowers newfound leverage. Here's a look.
RELATED FAQS
  1. How do you determine the Critical Path in operations management?

    Find out how to develop and use the critical path in a standard critical path analysis, a popular operations management technique ... Read Answer >>
  2. If interest rate swaps are based on two companies' different outlook on interest ...

    See how two companies can swap interest rate payments and mutually benefit. See how these swaps arbitrage differences in ... Read Answer >>
  3. Is it a good idea to buy mutual funds from banks?

    Mutual funds offer consumers a great way to access a professionally-managed group of assets at a relatively low cost, with ... Read Answer >>
  4. Who sets fiscal policy, the president or congress?

    Discover how fiscal policy is set in the United States, including how all three branches of government can affect a given ... Read Answer >>
  5. What are the main benchmarks that track the forest products sector?

    Learn how the net debt to EBITDA ratio, EBITDA to interest ratio and debt to capital ratio financial benchmarks are used ... Read Answer >>
  6. Which option is better on a mutual fund: a growth option or a dividend reinvestment ...

    When selecting a mutual fund, an investor has to make an almost endless number of choices. Among the more confusing decisions ... Read Answer >>
Hot Definitions
  1. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  2. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  3. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  4. Sharing Economy

    An economic model in which individuals are able to borrow or rent assets owned by someone else.
  5. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  6. Treasury Inflation Protected Securities - TIPS

    A treasury security that is indexed to inflation in order to protect investors from the negative effects of inflation. TIPS ...
Trading Center